Mudd v. Yarbrough

• Decision Date: 06 April 2011
• Docket Number: Civil Action No. 10–184–DLB–CJS.
• Citation: 786 F.Supp.2d 1236
• Parties: Barbara Jean MUDD, et al., Plaintiffsv.Shelly Ann YARBROUGH, et al., Defendants.
• Court: U.S. District Court — Eastern District of Kentucky

786 F.Supp.2d 1236

Barbara Jean MUDD, et al., Plaintiffs

v.Shelly Ann YARBROUGH, et al., Defendants.

Civil Action No. 10–184–DLB–CJS.

United States District Court,E.D. Kentucky,Northern Division,at Covington.

April 6, 2011.

Peter J. Summe, Summe & Lanter PLLC, Fort Wright, KY, Robert A. Winter, Jr., Taliaferro, Shirooni, Carran & Keys, Covington, KY, for Plaintiffs.Gary John Sergent, O'Hara, Ruberg, Taylor, Sloan & Sergent, Covington, KY, for Defendants.

MEMORANDUM OPINION & ORDER

DAVID L. BUNNING, District Judge.

This case arises from a dispute over the proceeds of a $400,000 Servicemembers' Group Life Insurance (SGLI) plan held by decedent Robert Lawrence Mudd. The underlying legal question is straightforward: Was Mudd's January 2009 modification to his life insurance beneficiary form valid? First, however, the Court must confront a myriad of procedural questions to determine whether it has jurisdiction and whether venue is proper in the Eastern District of Kentucky.

This matter is before the Court on Defendant Shelly Ann Yarbrough's Motion For Leave to File an Amended Answer (Doc. # 35) and her Motion to Dismiss for Lack of Personal Jurisdiction or Alternatively to Transfer. (Doc. # 36). Oral argument on the motions was conducted on April 1, 2011. Plaintiffs were represented by Robert A. Winter, Jr. and Peter J. Summe, and Defendant Yarbrough was represented by Gary J. Sergent. The motions have been fully briefed (Docs.# 35, 36, 40, 43, 48) and are ripe for review. For the reasons that follow, Defendant's motions are denied.

I. BACKGROUND

Decedent Robert L. Mudd enlisted in the U.S. Navy from Kentucky. (Docs. # 38; 39 ¶ 3). He was then ordered to Illinois for basic training, next to South Carolina for nuclear training, and then to his station in Georgia. (Docs. # 38, 39 ¶ 3). Though the record is not conclusive, it appears that while stationed in Georgia, Mudd met Shelly Ann Yarbrough. The two were married on May 21, 2004 in Jacksonville, Florida and, after living a short time in Georgia, purchased a residence in Florida. (Doc. # 36–2 at 18 ¶ 4).

Mudd and Yarbrough were divorced on May 2, 2006, though both continued living in Florida. (Doc. # 36–2 at 18 ¶ 6). Less than a year later, on January 1, 2007, Mudd and Yarbrough remarried in Las Vegas, Nevada; both listed Florida as their residence. (Doc. # 36–2 at 18 ¶ 7) Then, in May 2007, Mudd was transferred to Hawaii and Yarbrough accompanied him there. (Doc. # 36–2 ¶ 8). Yarbrough returned to Florida in August 2007, but not before signing a “Separation Agreement” that Mudd had prepared. (Doc. # 36–2 at 18 ¶ 8, 19 ¶ 12).

On June 5, 2007, before Yarbrough left Hawaii, Mudd completed an SGLI Election Form in which he designated his mother and Yarbrough as equal, co-beneficiaries of a $400,000 life insurance policy. (Docs. # 1 ¶ 16; 1–2). Yarbrough, however, was unaware that Mudd even had a life insurance policy until after Mudd's death. (Doc. # 36–2 at 18 ¶ 7).

On January 30, 2009—nearly a year-and-half after initially completing the SGLI Election form and long after Yarbrough had returned to Florida—Mudd obtained a copy of the form, and in the section titled “Beneficiary(ies) and Payment Options,” drew a line through the name “Shelly Ann Mudd,” ¹ her relationship to him (wife), designated share (50%), and payment option (36 payments). Decedent initialed next to the alteration, signed at the bottom of the form, and dated it “1/30/2009.” (Doc. # 1–2). Mudd did not alter the writing designating his mother a 50% beneficiary of the life insurance policy. On March 6, 2010, Mudd died while off duty in Hawaii. (Doc. # 1–3).

The Navy's Report of Casualty indicated that the beneficiary was an “unclear designation,” which prompted letters from Prudential's Office of Servicemembers' Group Life Insurance (OSGLI) to decedent's mother, Barbara Jean Mudd, and wife, Shelly Ann Yarbrough. (Doc. # 36–5 at 1–6). The letters informed the parties that this was a case of “unclear intent” and offered them release forms, by which they could simultaneously propose and authorize distribution of the proceeds. The parties were unable to agree on the appropriate distribution of the death benefit. (Doc. # 36–5 at 8–9). Subsequently, decedent's mother and co-administrators of his estate brought this action against Yarbrough, Prudential Insurance Company of America, and the United States,² seeking declaratory judgment that decedent's mother is the sole beneficiary of his life insurance policy, or alternatively, that decedent's mother and estate are equal co-beneficiaries of the policy. (Doc. # 1).

Yarbrough responded by filing a crossclaim and counterclaim seeking a declaration that she is entitled to at least half of the death benefit. (Doc. # 18). Defendant Prudential then filed a crossclaim and counterclaim in interpleader seeking to pay the full $400,000 death benefit, plus interest, to the Court and be discharged, thereby permitting Plaintiffs and Defendant Yarbrough to litigate proper allocation of the death benefit. (Doc. # 21). Following a status conference, the parties submitted a joint motion, which the Court granted, permitting Prudential to pay the full death benefit to the Court and be dismissed from the action. (Docs.# 31, 33, 34). Shortly thereafter, Defendant Yarbrough filed the pending Motion for Leave to File an Amended Answer (Doc. # 35) and Motion to Dismiss (Doc. # 36).

II. ANALYSISA. Motion to Dismiss for Lack of Personal Jurisdiction

1. Interpleader generally

“Interpleader is procedural device which entitles a person holding money or property, concededly belonging at least in part to another, to join in a single suit two or more persons asserting mutually exclusive claims to the fund.” White v. Fed. Deposit Ins. Corp., 19 F.3d 249, 251 (5th Cir.1994). Interpleader actions are remedial in nature, so the governing rules and statutes are to be liberally construed. State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 533, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967).

There are commonly two stages to interpleader actions. First, “the court determines whether the stakeholder has properly invoked interpleader, including whether the court has jurisdiction over the suit, whether the stakeholder is actually threatened with double or multiple liability, and whether any equitable concerns prevent the use of interpleader.” United States v. High Tech. Prods., Inc., 497 F.3d 637, 641 (6th Cir.2007) (citing 7 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 1704 (3d ed.2001)). Second, “the court determines the respective rights of the claimants to the fund or property at stake via normal litigation processes, including pleading, discovery, motions, and trial.” Id. This interpleader action is in the first stage.

As directed by the Sixth Circuit, the “primary test” for determining whether interpleader is appropriate is to consider “whether the stakeholder legitimately fears multiple vexation directed against a single fund or property,” which is known as the “stake.” Id. at 642 (quoting 7 Fed. Prac. & Proc. Civ. § 1704). The Sixth Circuit's requirement of a “legitimate” fear of overlapping litigation does not imply review of the merits of the adverse claims, which should instead be reserved for the second-stage of interpleader. 7 Fed. Prac. & Proc. Civ. § 1704; see also, John Hancock Mut. Life Ins. Co. v. Kraft, 200 F.2d 952, 954 (2d Cir.1953) (“In an interpleader action, the jurisdiction of the court is not dependent on the merits of the claims of the defendants”). Instead, the Sixth Circuit has found this requirement satisfied where multiple claimants present competing claims for the same identifiable products. High Tech. Prods., 497 F.3d at 642.

In this case, Plaintiffs Barbara Jean Mudd and decedent's estate, as well as Defendant Yarbrough, made competing claims on $200,000 of the death benefit previously held by Defendant Prudential. (Doc. # 21 ¶¶ 14–18). Prudential, in turn, was unable to determine which party was entitled to the death benefit and alleged that it “is or may be exposed to multiple liability.” (Doc. # 21 ¶ 21). Because Prudential was subject to competing claims for the same funds, this action was appropriately brought as an interpleader. (Doc. # 21 ¶ 25).

2. Because the elements of statutory interpleader are satisfied, the Court has subject matter jurisdiction under the Federal Interpleader Act

There are two approaches to interpleader in federal courts, commonly referred to as “rule interpleader” and “statutory interpleader.” Rule interpleader is brought pursuant to Fed.R.Civ.P. (Rule) 22, while statutory interpleader is brought pursuant to the Federal Interpleader Act, codified at 28 U.S.C. §§ 1335, 1397, 2361. The primary distinction between the two types of interpleader is that “unlike the interpleader statute which grants district courts original jurisdiction, the interpleader rule is merely a procedural device and does not grant this Court subject matter jurisdiction.” Sun Life Assur. Co. of Canada v. Thomas, 735 F.Supp. 730, 732 (W.D.Mich.1990) (citing Bell & Beckwith v. United States, 766 F.2d 910, 914 (6th Cir.1985)). Accordingly, “[i]n an action brought pursuant to the interpleader rule, either federal question jurisdiction or diversity jurisdiction must be established.” Id. Interpleader actions brought pursuant to Rule 22 are also subject to the same venue, Rule 4 service of process, and anti-injunction limitations as regular civil cases. Richard D. Freer, 4–22 Moore's Federal Practice–Civil § 22.04[1].

By contrast, statutory interpleader “enjoys liberal procedural rules including relaxed venue, personal jurisdiction and service of process requirements as well as broad discretion to enjoin overlapping litigation.” Bhd. Mut. Ins. Co. v. United Apostolic Lighthouse, Inc., 200 F.Supp.2d 689, 694 (E.D.Ky.2002) (citing 28 U.S.C. §§ 1397, 2361). Most importantly, statutory interpleader grants district courts ...